Top hedge funds take battering over Madoff

There was grave embarrassment at London's biggest hedge-fund group as FTSE 100 Man Group insiders admitted the firm effectively breached its own standards to invest in and lose $360 million in the Madoff scandal.

Shockwaves from the $50 billion "Ponzi" fraud by Wall Street investor Bernard L Madoff Investment Securities continued to batter London as St James's-based hedge-fund manager FIM and its $3.5 billion Kingate funds were named as a key Madoff "feeder" investor and another major loser.

Tower Bridge-based Man Group, a titan of the global hedge-fund scene, has admitted its RMF institutional fund-of-funds business invested in two Madoff funds.

Defending itself, Man said: "It appears that a systematic and comprehensive fraud may have been committed, evading a range of structural controls." But insiders admit that investing in funds with such poor oversight and control arrangements breaches the high industry standards Man has signed up to.

Last night, the London-based Hedge Fund Standards Board put out a statement trying to limit the reputational damage to the wider alternative-investment community.

The board's chairman, former Goldman Sachs boss Antonio Borges, said: "The Madoff scandal highlights just how important it is to have independence of process in relation to administration of the fund and the valuation process. It also highlights the need for robust governance practices and oversight via independent boards which will challenge management procedures and behaviour.

"Hedge-fund standards are designed to address exactly these issues, to help prevent such events from happening and to provide investors with necessary transparency." One leading backer of those standards, who last night put his name in support of Borges' comments, is Man Group's managing director, Peter Clarke

The board statement, whose backers also include Michael Hintze of CQS, Paul Marshall of Marshall Wace, Manny Roman of GLG and George Robinson of Sloane Robinson, was taken as a slight to Madoff lossmakers in London such as Nicola Horlick, Arkie Busson and RAB Capital's star stockpicker Philip Richards.